October 23, 2014

Southeastern Brazil Running Low on Water and Electricity

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazil has the largest fresh water reserves in the world and one of the largest hydroelectric power generation systems, yet the country is at risk of running out of both water and electricity. The problem is a prolonged drought that has afflicted the southeastern part of the country which has the highest population and the greatest demand for water and electricity.

According to the National Operating System (ONS), the hydroelectric reservoirs in southeastern Brazil and the center-west region of Brazil, which combined represents 70% of the country's total, have fallen to 21.11% of capacity and they are expected to decline to 19% of capacity by the end of October. What has officials very worried is that widespread blackouts occurred in 2001 when the capacity of these same reservoirs dropped to 21.39% of capacity. By the end of October, the available water capacity in the reservoirs will be significantly lower than in 2001 (-2.4%).

Various cities in southeastern Brazil have instituted water restrictions, but no electricity restrictions have been instituted as yet.

Even before the blackout problems encountered in 2001, Brazil realized that its high dependency on hydroelectric power was a risky proposition and that the country needed to diversify its electrical generation. There have been a number of natural gas powered thermal plants constructed in Brazil and these plants now represent 11.3% of the electrical generation in Brazil. Critics contend that the diversification of the electrical system has been too slow to insure that blackouts won't occur when there is a shortage of rainfall such as right now.

This problem will only be resolved when significant rainfall returns to central and eastern Brazil. Unfortunately, the forecast is not calling for more normal rainfall to return to the region until November.